Great blog posts about macroeconomics

With the release of Star Wars the Force Awakens last year Star Wars fans got to see that the galaxy was not restored to balance after Return of the Jedi. The Rebel Alliance was turned into the New Republic, but they were unable to ward off and eliminate the last Imperial holdouts, leading to the rise of the First Order. How though, after two crushing defeats could the Empire still survive in the face of a new galactic government? The answer is a complete economic crash across the galaxy which the New Republic was not set up to handle.

The Star Wars economy is actually shown to be very much like our own world economy, just on a much larger scale. Rather than countries or states, the Star Wars galaxy has planets that general specialize in various products and industry. Amongst these are multi-planetary firms, which can even be broken into sectors throughout the galaxy for manufacturing, finance, corporate, or agricultural needs. Even further we can see the role the government plays in the galactic market in The Phantom Menace when the senate is debating over taxations of trade routes. In the rise up to the Empire and during the reign of the Empire we see the Galaxy in a war economy. Economists have drawn the common link to this time period with the U.S. in World War Two. During these times in fact the economy likely grew tremendously due to the large amounts of government spending. One of the biggest being the Death Star.

By using the cost of steel used in battle ships economists estimated that the Death Star would cost approximately $193 Quintillion (U.S. 2012) spread over twenty years. The estimated Gross Galactic Product per year was $4.6 sextillion (U.S. 2012) or $92 sextillion over the twenty years. When the Rebels destroy this first Death Star it would likely cause economic panic. The financial markets would drop and consumer confidence would most likely drop across the Galaxy, risking spiraling the Empire into a long term recession. The Emperor rather than allow this to happen though utilized effective fiscal policy and choice to raise government spending, even in the face of debt, in order to raise AD and bring the economy back to equilibrium. This increase in spending was done by the decision to build the Death Star 2. An effective choice due to the war economy they were placed in that allowed them to access unlimited resources and quick startups. As well having already done the research and construction on one, this second one could be built much faster, in only five years, increasing the rate at which the expansionary policy was fed into the galactic market. The Death Star 2 was also significantly larger meaning it cost $419 quintillion (U.S. 2012). This increased spending would certainly help to stabilize the economy after the destruction of the first Death Star, but in the wake of its destruction there was no way for the New Republic to prevent a complete economic collapse.

When the Rebellion destroyed the second Death Star along with the Empire they forced the Galactic Economy to collapse. Similar to the destruction of the first Death Star markets and consumer confidence would have collapsed. On top of it this time though the ruling government would have been eradicated, meaning the debt they owed would either be defaulted on or passed on to the New Republic. The defaults are estimated to be around $512 quintillion (U.S. 2012) under a best case scenario and would like lead to bank failures across the galaxy. If there had been an Imperial version of deposit insurance it would not matter now as the Empire was gone and would have no way to pay it. The bailout that the New Republic would be required to pay to stabilize the Galactic Gross Product to avoid a catastrophic economic collapse would be 15%-20% of the GGP. These are funds that a brand new democratic government entity likely don’t have and will not be able to raise fast enough to prevent collapse. Taking on these hard economic pressure the New Republic would be scrambling to do what it could to stabilize the economy while still establishing itself as the new government. It would not have the resources or capabilities to hunt down the remaining Imperial holdouts. As well, these dire economic conditions would create a perfect environment for such holdouts to establish there own anti-Republic movements that would eventually culminate in the First Order, similar to the rise of the Nazi party in Germany after World War I. So while the Battle on Endor was a military victory for the Rebellion, for the galaxy it was a guarantee of years of economic hardship and more war to come.

As a student at a private, for-profit collegiate institution, I am well aware of the ever-growing costs of tuition. This is quite evident for me as I compare tuition at Holy Cross to my sister’s tuition at Smith College, another private, for profit institution, who is 8 years my senior. When my sister was a junior at Smith, tuition for both semesters, including room and board, was approximately $52,000 adjusted in 2016 dollars. Even from just my freshman to junior year and accounting for inflation, the cost of tuition at Holy Cross has increased by $4,000 (this past year costing $64,608.15).

Looking back even further, I asked my friend’s dad how much tuition was for him the year he graduated Holy Cross. His answer? Including room and board, approximately $6,000 in 1979. Adjusted using CPI index equates to just short of $20,000 for the year, about $3,000 above the national average for private colleges according to College Board.

The cost of higher education at private colleges and universities has increased 6% above the rate of inflation. According to US News, even from 1995 to 2013, average tuition costs have increased by more than 100%.

So why is tuition rising faster than any other goods and services?

Simple supply and demand graph. Since 1971 to 2013, enrollment in higher education has more than doubled. This increase in demand is likely due to the continued thought that a bachelor’s degree gets a good return in the future. Alongside of that, a high school diploma does not get as far as it once did. Therefore, increased demand leads to higher prices.

Amenities, amenities, amenities. The amount of student services colleges provide these days are also part of the reason for the disparity in tuition costs from the 70’s to now. Many of these student services require hiring more faculty, driving up costs for the college. These services range from counseling to academic assistance to career development.

Loss leader. Colleges and universities are spending more and more money on maintaining the ascetic of campus appeal hoping that they will see a return by attracting more perspective students. Athletics are another prime example of this. Universities put money into athletic departments hoping that schools with good athletics will draw in students and local fans.

Shrinking subsidies. Private colleges have been receiving smaller and smaller subsidies from the government to help with costs, thus making tuition higher to compensate the loss.

All in all, many teenagers are seeing the potential returns of a bachelor’s degree to outweigh the ever-growing costs of tuition.

The lottery system in the United States seems like a very simple way to generate profits on a state level. People willingly donate money to the state government in the very minimal chance that they earn money back. Statistically, the odds of winning the lottery are so low that yields on revenue generated compared to payouts should be highly favorable for the state. However, when you look the numbers closely, it becomes more complicated and less profitable than many realize. It is evident that consumption in the lottery is way less helpful for the government in terms of total contributions to GDP, but are the alternatives too politically unfavorable to make a change to the current lottery system?

Examining the true impact of lottery tickets requires a fair analysis of the negatives as well as the positives. First, the scope of lottery revenue on state governments is relatively small. Americans spent a total of $70.15 billion on lottery tickets in the last year. However, when you break down the percentages, that total becomes a lot smaller. By the numbers, money spent on tickets is broken down into several categories. Sixty percent of the money is paid out in winnings. Another 5% is given out as commission for those stores that sell the tickets with another 9% going towards things like advertising and miscellaneous administrative costs. That leaves around one-fourth of the actual earnings going to the states.

When you see that 26% of lottery sales go to state governments, it is easy to understand why they may be less viable options to help GDP. For example, if you walk into a convenience store and spend $20 on lottery tickets, the state sees $5 of those sales. This one-fourth cap would originally count as a consumption expenditure but would then be transferred over as a government expenditure when that money is used on other government programs. However, if you spent those $20 instead on Skittles, all $20 would count as a consumption expenditure with no profits being taken out of the original purchase. This simple model helps to demonstrate why lottery ticket sales seem profitable in practice but backfire when actually implemented.

Why, then, would state governments ever defend their lottery systems if they are seemingly losing so much revenue from sales? The issue many state governments face is the implementation of appropriate tax policy to counteract the necessary funds needed to fund specific government programs. The lottery system is a perfect loophole to increasing taxes because it is 100% voluntary on the side of the consumer. This 26% revenue gained by state governments is incredibly helpful for projects such as building roads to improving public schools. The total funds given to state coffers is around $18 billion, which is roughly only 2% of total state budgets. This may seem like a drop in the bucket but is an extremely popular way to increase budgets. The alternative of increasing taxes to raise that $18 billion would be a wildly unpopular move for any politician.It is now evident that the lottery system is a very inefficient way to generate state funding. However, there does not seem to be a clear-cut way to improve the current system to favor an increase in government expenditures. The only way to create incentives in the current lottery system is to increase the prize pool. However, this in turn only makes it more likely that someone will win that large jackpot. It is an effective way to voluntarily get a populace to willingly contribute to the state, but are the benefits worth it at such high costs?

This past weekend was the 143rd running of the Kentucky Derby at Churchill Downs Racetrack in Louisville, Kentucky. Known as the “Greatest Two Minutes in Sports,” I thought it would be interesting to see the economic impact that the Kentucky Derby has beyond those two electrifying minutes.

According to my research, there are essentially two ways that the Derby provides an economic stimulus to the region: first, from the race itself (by way of tourism, ticket sales, etc.) and, secondly, from wagers placed on the races—both those legally recorded and those that were not placed through an official Las Vegas book.

The Kentucky Derby Museum, the non-profit organization that collects information on the race and preserves its history, released financial figures about the race. The Museum deems the Derby as an “economic event,” with the most recent study finding that the Derby has a $217 million immediate impact on the region. According to the same study, the equestrian industry has an economic impact of just over $3 billion in the state of Kentucky alone. The industry generates an employment opportunity to over 55,000 people in Kentucky as well. Clearly, the equine industry is a massive part of Kentucky’s economy, and the main-event, the Kentucky Derby, is the most important part of the industry.

Determining the exact economic impact that gambling on the races at the Kentucky Derby is significantly more tricky. This is due to the fact that so many wagers are placed illegally, or through any means other than an officially-licensed Las Vegas casino. According to the Washington Post, near $4 billion is wagered legally in Las Vegas every year. However, anywhere from $80 to $380 billion is wagered illegally—the wide range in estimates goes to show just how much money is not adequately being regulated. The official numbers for the 143rd Kentucky Derby have yet to be officially released yet, but the numbers from 2015 and 2016 paint a consistent picture of what economists can expect. In 2015, a record-breaking $194.3 million was wagered legally, while estimates for illegal wagers are many times more than that. In 2016, $192.6 million was wagered legally, a slight decrease from 2015. Expectations for 2017’s Derby are in the same range.

Clearly the Kentucky Derby plays a significant economic role in the state of Kentucky and in the United States in general. Most of the economic stimulus to Kentucky is through that of the equine industry, while the larger economic impact is through the black-market of sports gambling.

This past weekend was the 143rd running of the Kentucky Derby at Churchill Downs Racetrack in Louisville, Kentucky. Known as the “Greatest Two Minutes in Sports,” I thought it would be interesting to see the economic impact that the Kentucky Derby has beyond those two electrifying minutes.

According to my research, there are essentially two ways that the Derby provides an economic stimulus to the region: first, from the race itself (by way of tourism, ticket sales, etc.) and, secondly, from wagers placed on the races—both those legally recorded and those that were not placed through an official Las Vegas book.

The Kentucky Derby Museum, the non-profit organization that collects information on the race and preserves its history, released financial figures about the race. The Museum deems the Derby as an “economic event,” with the most recent study finding that the Derby has a $217 million immediate impact on the region. According to the same study, the equestrian industry has an economic impact of just over $3 billion in the state of Kentucky alone. The industry generates an employment opportunity to over 55,000 people in Kentucky as well. Clearly, the equine industry is a massive part of Kentucky’s economy, and the main-event, the Kentucky Derby, is the most important part of the industry.

Determining the exact economic impact that gambling on the races at the Kentucky Derby is significantly more tricky. This is due to the fact that so many wagers are placed illegally, or through any means other than an officially-licensed Las Vegas casino. According to the Washington Post, near $4 billion is wagered legally in Las Vegas every year. However, anywhere from $80 to $380 billion is wagered illegally—the wide range in estimates goes to show just how much money is not adequately being regulated. The official numbers for the 143rd Kentucky Derby have yet to be officially released yet, but the numbers from 2015 and 2016 paint a consistent picture of what economists can expect. In 2015, a record-breaking $194.3 million was wagered legally, while estimates for illegal wagers are many times more than that. In 2016, $192.6 million was wagered legally, a slight decrease from 2015. Expectations for 2017’s Derby are in the same range.

Clearly the Kentucky Derby plays a significant economic role in the state of Kentucky and in the United States in general. Most of the economic stimulus to Kentucky is through that of the equine industry, while the larger economic impact is through the black-market of sports gambling.

Verizon has recently struck up a $21 million deal with the NFL to acquire the exclusive streaming right to next season’s week three match-up between the Baltimore Ravens and the Jacksonville Jaguars. The game will be played at London’s Wembley Stadium. The game will be distributed through three of Verizon’s subsidiaries; its AOL platform, its mobile video service go90, and site oriented towards the young male audience called Complex. Verizon will have exclusive global rights to the game, except in Jacksonville and Baltimore territory, where the game will viewable via local cable.

In February, Time Warner stockholders passed a vote in favor of the company’s proposed merger with AT&T. AT&T will acquire Time Warner for $85.4 billion. The argument that both of these companies are making in favor of this merger is that it is a vertical acquisition, meaning that the two companies are not direct competitors. This argument is how both companies plan on fending off the Department of Justice.

My point in citing both of these recent events is that the telecommunications industry, similar to other industries in the American economy, is becoming completely monopolized. Verizon has exclusive global streaming right to an NFL game next season. The millions of NFL fans in the US have no choice but to use Verizon’s services to watch a football game. Also, take a look at the different technological vehicles Verizon is using to stream the game. I remember being a first-grader and having my parents describe to me what email was, showing me their AOL address. Verizon began as a mobile phone company and has expanded into something that basically no consumer can avoid using.

In addition, AT&T’s merger with Time Warner is problematic for American consumers. I agree that AT&T and Time Warner are not direct competitors, but AT&T is a telecommunications company, and Time Warner is a cable company. AT&T is a distributor of cable television, also known as Time Warner. This cannot be good for consumers. Saying that this merger is acceptable because the acquisition is vertical is picking the lesser of two evils. Two competitors merging, or a distributor merging with a distribution company is bad for consumers either way.

My general point is that telecommunications firms continue to grow. The more they grow, I think, the worse off we all are as consumers. As the world continues to become more and more invaded by technology, these firms will expand their size and power, and we will be at their will.

“Which would make you safer and healthier: Being the neighbourhood hermit, locking and bolting your doors, not helping your neighbour but instead threatening them and allowing trash, sewage, rats and cockroaches to accumulate around your house? Or actually caring about your neighbourhood and neighbours and pitching in to keep your surroundings clean and safe?” – Bruce Y Lee, “Bill Gates Is Right: USAID Is Not Just Foreign Aid, It Aids The U.S.” Forbes

Trump’s new “budget blueprint” to take place in the fiscal year 2018, following his campaign to “put America first” may actually put America further behind. Internal budget documents and sources, which came out in March of this year, showed plans for drastic cuts in U.S. assistance to developing countries, as well as began talks of merging the State Department with the United States Agency for International Development, also known as USAID. Trump’s proposal shows slashes of up to 28 percent to the State Department’s and USAID’s budget, and cuts to general aid to developing countries by over one-third. These newly available funds would then be transferred to programs tied more closely to the administration’s national security objectives. Forty-one countries are facing cuts, as global health funding is targeted, with the U.S. government expected to hit overall health program abroad fundings by approximately 25 percent. And despite the immense bipartisan opposition to such cuts in foreign assistance, experts still expect some amount of lowered spending levels on foreign aid to persist nonetheless. However, many argue that the cuts proposed to lower foreign aid spending will ultimately hurt the United States. Andrew Natsios explained the cuts as “basically… eviscerating the most important tool of American influence in the developing world, which is our development program … I don’t think they [those in the Trump administration] understand what the role of USAID is, … USAID’s mission directors are among the most influential foreigners in the country.”

USAID began in 1961, under President John F. Kennedy, who saw an obligation of the American people to their neighbours in an increasingly interdependent global community. And despite the inherently altruistic goals of USAID, there are many selfish reasons for the country to seek the organization’s continued success. For instance, providing foreign aid to developing countries creates numerous economic opportunities for the United States. It also works to make the world safer for U.S. business and Americans, as well as generally stabilizing more vulnerable parts of the world through promoting health, economic and security opportunities.

And in general, the huge cuts to Foreign aid being suggested would likely make America less safe. Cuts to global health funding would put Americans at risk in the case of a major epidemic. A former USAID employee, and current executive director for the Sustainable Security and Peacebuilding Initiative at the Center for American Progress, John Norris, expressed his concern, “We’re going to see our own country much more vulnerable to the spread of infectious diseases as we saw with the Ebola crisis. Things that start abroad can quickly erupt here.” The work to prevent epidemics, as well stop emerging diseases, is just one of the many tangible way in which American aid works to benefit Americans. This was seen through the Ebola outbreak in West Africa. The epidemic would’ve been much worse had the disease spread more widely into Nigeria; this was prevented in large part because of a group of healthcare workers who had been stationed there for an anti-polio campaign ran by the United States that were immediately reassigned to fight Ebola and help stop the spread from crossing the Atlantic to the United States.

And so, not only does U.S. development money save millions of lives and improve the quality of life for a large portion of the world’s population, it also inadvertently works to provide numerous tangible benefits to the United States. One can only hope that the current administration keeps this in mind as they work to push forward their initial budget cuts to foreign aid.